The politics of power

I'm sure everyone's been following the brouhaha over the Enron Tapes and what they reveal about the tactics of the now-mostly-defunct-but-still-thrashing-about energy giant. And make no mistake, what the tapes confirm is what was perhaps already clear: a corporate culture so reptilian, so deeply devoid of ethics and so far outside the law, that it now has its own special wing reserved in the depths of Business Hell.

What's especially worth observing about the tapes, though, is what they say about the bigger picture. Thomas Leavitt at Seeing the Forest explains:

The Enron Tapes and the Snohomish vs. Enron hearing aren't just about a few potty mouthed "bad apples" at Enron engaging in opportunistic exploitation of regulatory loopholes (as Enron's PR people would like you to believe). They highlight a fundamental problem of our system of governance: the balance of power between corporations and the average human citizen is way out of whack. This is a point that those of us on our side of the issue would be well served to bring to the fore.

Enron lobbied our legislators and regulatory agencies with the conscious and deliberate intent of creating a non-transparent marketplace full of inefficiencies that they could then exploit (see Dr. Carl Pechman's testimony, quoted in previous posts). AND OUR LEGISLATORS AND REGULATORS LET THEM GET AWAY WITH IT... or rather, they did not intervene, because they saw nothing unusual in the process as it happened. This doesn't always result in disaster (apparently New York state managed the deregulation process better), but it happens way too often.

... This goes beyond partisan ideology -- what we are talking about here is the fact that elements of corporate America have systematically subverted our government's regulatory apparatus for private gain. This happens over and over and over again, regardless of which party is in power, at any level. In this particular instance, it just happened to go sour in a very big, and very public way.

(Be sure, by the way, to check out the compilation of Enron-tapes material at Leavitt's own blog.)

Leavitt's point is important, because deregulation and the "magic of the marketplace" have become mindless panaceas for politicians at nearly all levels of government, both Republican and Democrat. And the results are plain to see: "Deregulation," particularly in the energy industry, is a grotesque failure, an open invitation for private corporations to ransack the public's pocketbook.

It's not surprising that this has happened. Opponents of deregulation have been consistently attacked by the likes of Rush Limbaugh and other conservative mouthpieces as "socialists," and over the past 15 years a mythology has built up around the notion that "getting government out of business" is an unrelievedly good thing.

The result has been that the last real bulwark of the public interest has turned out to be government regulators, particularly small, local- and state-level agencies who remain bound by law to stand up for the public.

For these most recent revelations, the nation has the Snohomish County Public Utilities District, just north of Seattle, to thank. And a fine public service it was. If nothing else, we learned that the fraudulent "energy crisis" of 2000 was actually just Enron gouging the public on West Coast for about $1.1 billion.

What's especially worth noting about the PUD case is what it demonstrates about the power of Enron's scurvy crew to keep inflicting damage well after their supposed demise. The PUD obtained the tapes as part of its defense in a lawsuit filed by Enron against the agency after it cut off its contracts with the energy giant in the wake of the gouging. As Joel Connelly points out, Enron continues to rip off consumers by filing these outrageous lawsuits. David Horsey has this one right.

Outrageously enough, the Bush administration's Justice Department only reluctantly released the tapes after being forced to do so by the courts. And it continues to do so with even more extensive material. Fortunately, the state's congressional delegation is on the job on this on. Sen. Maria Cantwell is demanding some action be taken by Ashcroft and Co. -- including, most recently, e-mails written by Enron employees that are being hidden by the Federal Energy Regulatory Commission. (Of course, Cantwell has also fired off a letter to Bush "asking that he do everything possible to provide relief to Washington state consumers who have been gouged by Enron while the Federal Energy Regulatory Commission (FERC) failed to protect them from Enron's market manipulation." As Shrek would say: Yeh, right. Like that's ever gonna happen.)

The problem really is a systemic one, rooted in the phony myth of deregulation. As things now stand, we're saddled with a federal oversight agency absolutely wedded, ideologically and otherwise, to even further deregulation -- even though the notion of improved efficiency in energy markets and delivery through divestment of public ownership has proven, over and over again, to be not a dream but a nightmare.

Enron is only one example. The same fiasco has occurred on a smaller scale throughout the country, sometimes with equally disastrous results, sometimes with only minimal harm. But nowhere has deregulation proven to provide even a margin of benefit to consumers. It has so far only been a gigantic bonanza for energy companies.

One of the real small-scale disasters was the demise of Montana Power, which through deregulation decided to get out of the power-generation business; the company actually was renamed Touch America and relaunched itself as telcom player, only to be shortly dashed on the rocks of reality and bankrupted. (One of the best accounts of this is the Missoulian project Generations of Power.)

Even in states where deregulation supposedly has worked, the savings to consumers have been minimal, and the choices are nearly nonexistent, as my good chum T.M. Sell explored in depth in this Salon piece on deregulation.

The chief reason, as Sell explains, is that after an initial burst of activity, the power providers have begun drying up. So even in states like Pennsylvania, touted as deregulatory successes, the only savings have been to major power consumers, while residential consumers are left holding the bag:

[T]he biggest reason for the lack of real competition, critics say, is that there's simply no money to be made in selling residential electricity at competitive prices. Firms that rushed into the power-supply business rapidly discovered that a high-cost, low-margin business with customers who use very little of your product won't pay the bills, let alone turn a profit. And residential customers buy all of their power at the wrong times -- morning and evening off-peak periods.

... Today, in all the deregulated states, there isn't much of anybody who's offering any electricity at any price to the great mass of consumers, unless they're factory owners or an aggregation of customers with enough leverage to work a deal. While deregulation has meant savings for large customers, residential customers appear to be saving money only where states have mandated rate cuts, and all of those rate caps are eventually scheduled to expire. Most residential customers in the 17 actively deregulated states aren't shopping for power, and few energy suppliers are trying to serve the residential market.

The real problem is that, as Sell later explains, the problems brought to the surface by the Enron manipulations haven't gone away:

Critics also point to another potential problem of a market-based electricity system: reliability. Under the old system, plants that will supply power during periods of peak demand could be built into the rate base and made economically feasible.

"We're about to throw all that away for a slogan," says utility consultant Merrill Schultz. Under the new system, Schultz and others point out, there's a positive disincentive to have a plant that may operate only on a few cold mornings a year. First, you can't charge people for it when it's not operating. And second, the mere presence of such plants ought to tend to depress the price of electricity. In a purely profit-driven market, nobody wants that.

"It's not very profitable to sink a couple of hundred million dollars into a power plant unless you have customers you can count on to buy from you," Odisio says.

Meanwhile, big chunks of the country say their disaster plan is to import power from Ontario. Last summer's power meltdown ought to at least call that notion into question.

FERC spokesman Bryan Lee says the answer is regional power pool planning, which would make it easier for states to push through new transmission lines, among other things.

For all its faults, the old, regulated system had its virtues. People got power, and utilities were profitable, and reliability, considered over the whole system, was outstanding.

Merrill Schultz, who did most of his work in the West, watched the California debacle with much dismay, and he worries it will be repeated. The emphasis in the industry has gone from public service to competition.

"I was fooled by the precipitous change of proud independent operators into greedy marketers," he says. "All those people did whatever they could to make big bucks and no longer cared about reliability or performance."

In other words, thanks to the manifest failures of government regulators, we are faced with the prospect of further brownouts and blackouts this summer, thanks once again to a system that we know is broken and no one is fixing.

In another column, Joel Connelly points out that the root of the problem at this point lies with enforcement -- which is to say, the remarkably laissez-faire Federal Energy Regulatory Commission.

But then, this should surprise no one. This administration is clearly content to let the "magic of the marketplace" just magically make billions of consumer dollars disappear while its cops gaze skyward and whistle a tune. Whether it's the Justice Department or FERC, the unified front it has presented so far should leave little doubt whose side it is on.

I just wonder how much longer conservatives can keep successfully selling their ideology as somehow helpful to average, working-class Americans.